Streaming brings boost to Berlin

Berlin Film Festival 2013

Digital distribution and compressed windows may not seem like the sexiest topics, but these two phenomena have bolstered an indie film world undercut by the crash of the DVD market. And whether it’s pre-theatrical VOD, day-and-date multiplatform distribution or ancillary windows far briefer than the customary three-month, compressed window releasing has become common enough — and sometimes profitable enough — to begin influencing how films are financed.

Though it’s rarely the first choice of filmmakers or financiers, those headed to the European Film Market in Berlin and other indies are beginning to factor in the possibility of day-and-date rollouts while assembling feature budgets, as the expected range of minimum guarantees grows clearer and the floor for what VOD distribs will pay rises after several lean years.

“My fallback position — if it doesn’t turn out to be a big theatrical deal — is the day-date release. When you’re going to the market, you know how many distributors are interested in the kind of movies you are making, and about half of them are into it, including IFC, Magnolia, Roadside and Radius-TWC,” says “Margin Call” exec prod and film seller Cassian Elwes, who can count on those distribs for minimum guarantees that typically range from $500,000 to $2 million, depending on a feature’s star power. “I’m certainly considering it when doing estimates of what I’m going to sell the picture for in the U.S.”

photos/_specials-art2/BERLIN_elwes_mugs.jpg” vspace=”8″ hspace=”8″ align=”left”>That range may be rising: Radius-TWC just ponied up $3 million for the U.S. rights to Sundance’s star-filled “Lovelace,” set for a fall multiplatform release. Its subject matter — porn-star pioneer Linda Lovelace — puts it on the extreme end of the PG-13 or R-rated fare (usually genre titles) that normally do best within the release model.

Elwes adds that compressed window releasing has been a boon to the dire state of indie film distribution. “It’s emboldened smaller companies to pay m.g.’s knowing they can do a VOD release day-and-date with theatrical and have a revenue stream that’s a little predictable. It’s actually encouraged distribution.”

The growth of VOD is part of an overall stabilization in the homevideo market after a rough post-economic crash period. Better data that’s emerged in recent years has allowed for more accurate modeling that has further encouraged film financing.

“Alongside the banks, the investors are looking at what is that number against the U.S. (expected theatrical take),” says Elwes’ fellow “Margin Call” exec prod Kirk D’Amico, whose Myriad Pictures has financed, presold or repped several day-and-date films, including Magnolia’s VOD hit “Goon.”

“We had freefall for a couple of years against the U.S. — it was so bad, you’d sell a multimillion-dollar film to (digital distributors) Grindstone or Screen Media for $100,000,” D’Amico says. “But because VOD has picked up, there are solid numbers on it, and now that there’s competition based upon the Magnolias, IFCs, Radiuses and other companies now focused on the VOD market, banks and financiers are looking at the U.S. as being a little healthier — not like in the old days, but better than it was a year or two ago.”

Other emerging day-and-date distribs include Cinedigm Entertainment Group, MPI Pictures, Tribeca Film and a partnership between Variance Films and Gravitas Ventures.

Although they don’t make day-and-date releasing a goal when packaging their films, frequent collaborators Elwes and D’Amico factor the chance of a digital bow into their financing models. “We can say, ‘This film may end up going the VOD route, because the subject matter or cast might not make it in terms of a wide-release film,’ ” D’Amico says.

He discusses it as a “plan B” scenario with such outfits as Dreambridge Films and Media House Capital when they finance lower-budget films, or others that may work better overseas than domestically. One such project is the Media House-backed crime drama “Electric Slide,” starring Jim Sturgess, Chloe Sevigny and Isabel Lucas.

“It was something the bank and the financiers looked at in terms of assessing the U.S. value,” D’Amico recalls. “We have substantial theatrical hopes for it, but they said,’Look, if it ends up not being theatrical, we still believe in the strong VOD value of the story.’ “

One key film that’s helped sell financiers on hybrid releasing — and a possible model to support it — is “Arbitrage.”

Lionsgate and Roadside Attractions teamed to nab the Richard Gere-toplined financial thriller for $2 million at Sundance 2012. They gave it a simultaneous Sept. 14 VOD rollout with a pre-VOD, Oscar-qualifying theatrical run that was nearly identical to their $1 million 2011 joint Sundance pickup and Oct. 21 VOD/theatrical bow of the financial thriller “Margin Call.”

Roadside co-prexy Howard Cohen says the main difference (aside from “Arbitrage” having more genre appeal to lure multiplex audiences) was Lionsgate investing $3 million in P&A on the opening of “Arbitrage” vs. $1 million total for “Margin Call,” delivering a more powerful VOD push as it fueled a wider theatrical opening (197 vs. 56 theaters).

The results paid off with a gross that was stronger in both theatrical ($7.9 million vs. $5.4 million) and VOD/digital (a projected $14 million vs. around $6 million, each believed to be the highest ancillary takes for a hybrid release at the time of their debuts).

While there’s an argument that a conventional window may have meant a bigger theatrical take for each film, another can be made that Lionsgate’s 70% take on VOD sales (vs. a typical 40% to 50% take in theaters) inspired a national marketing push that boosted their theatrical potential.

“Lionsgate was willing to spend more money upfront on releasing both those movies theatrically knowing that the VOD was available at the same time,” Cohen says. “When we did the modeling, it was theatrical success plus a $7 VOD price point that made the investment worthwhile. … It’s still scaring a lot of people, which is why I don’t know that anyone else is rushing to try it. You’re spending more money than an indie movie would normally spend on a platform release while not having (access to) two-thirds of the theaters, so it’s a narrow box. Other players with that kind of money want to spend it on movies that can do $30 million.”Another issue is the additional expense of paying to “fourwall” some theaters to get a wider release, since most chains won’t book hybrid releases with a conventional split.

Roadside’s Cohen says the number of fourwalls per release varies, and that no more than 25% of the theaters for “Margin Call” and “Arbitrage” were fourwalled.

Despite its success in the arena, Roadside has no upcoming day-and date releases set, and may only do one a year, largely due to the risk and difficulty involved. “VOD is being looked at as the straight-to-video of today,” Cohen says. “Everyone else is using theatrical as a marketing ploy to drive the VOD. We are actually trying to make both media work.”

He notes that there are exceptions, like Magnolia’s $3 million hit “Melancholia” and IFC’s $2 million-plus grossers “In the Loop,” “The Trip” and this year’s “Sleepwalk With Me.”

Although some distribs are beginning to release official numbers, most VOD grosses for these and other day-and-date films aren’t made publicly available, which can make cursory or seemingly disappointing theatrical runs a cloudy measure of their success.

Some titles from IFC, Tribeca Film and others may play as little as a weekend or select evening shows to garner promo-pushing reviews, or simply back their VOD menu’s claims that the films are “now playing in theaters.”

There are sometimes advantages to not breaking the bank on P&A spending: Radius-TWC nabbed the “Bridesmaids”-style comedy “Bachelorette” at last year’s Sundance for $2 million. While it only widened to 60 theaters and made just $448,000 over its five week run, a company rep says it’s earned $7.3 million on VOD, with a higher revenue share and lower expense for the new distrib.

Varying figures have been reported, but Myriad’s D’Amico says Magnolia’s $4.2 million U.S. box office take on the hockey comedy “Goon” (off its reported $2 million buy) was exceeded by a $6 million ancillary score.

“The folks at Magnolia get a lot of criticism when they’re releasing a film, but when those overage checks come in, all of a sudden they’re heroes,” he says.

The hybrid releasing model is impacting many films beyond those that end up with day-and-date distribution. Financiers who factor in a potentially limited or compressed window release on specialty fare shrink budgets to accommodate those possibilities, but when a film turns out better than expected, it can have a pleasant upside.

“If you’re selling a film (overseas) without a built-in U.S. release, and it’s not the type of film where you are essentially saying ‘this will go wide or have some kind of 600-plus-screen release,’ then you have to take that into account in your foreign values,” says Marc Schipper, COO of financier/sales agent Exclusive Media. “It puts pressure on the budget, but we’ve made quite a bit of hay out of making movies that play in this area from a downside risk perspective (and have a larger-than-expected) theatrical. The best example of that is ‘End of Watch.’ It was made for a very sensible budget, and our foreign buyers were delighted when the film got a wide release, because they hadn’t anticipated it.”

Open Road picked up the reportedly $7 million cop drama “Watch” starring Jake Gyllenhaal, launching a 2,730-screen release last September that grossed $41 million.

Schipper emphasizes that Exclusive never makes a day-and-date bow its goal when financing a film,doesn’t do it at new distrib arm Exclusive Releasing and that only one of the 30-odd films it’s financed has used the model: the Hilary Swank-toplined thriller “The Resident” (released in a two-theater Image Entertainment run and on DirecTV in February 2011).Yet VOD’s growth, along with the stabilization of the entire homevideo market, has made a strong impact on all of the outfit’s film financing. “The VOD landscape has fundamentally shifted the ancillary value of films, particularly in the U.S., and also in the U.K.,” says Exclusive Media COO Marc Schipper.

“Two or three years ago, you had no idea what the value of a film that wasn’t in wide release was. Right now there’s much more intelligence as to what revenue will be generated in the ancillary market. It allows more films to been greenlit with a better risk/reward profile.”

Some top helmers are even starting to make a pre-theatrical VOD release their goal from the production stage.

“There are some well-known filmmakers that are making movies just for digital distribution,” says Sundance Selects/IFC Films president Jonathan Sehring, who predominantly fills those labels and the genre arm IFC Midnight with compressed-window releases.

“That’s something relatively new, and the guys that are doing it know that the marketplace is changing, and that it’s a new way they can get movies financed and seen.”

Sehring says Paul Schrader, who spoke with him in late 2012 about the helmer’s $250,000 Kickstarter-funded potboiler “The Canyons,” is targeting the film’s rollout “specifically for digital.”

Focus Features’ ancillary label Focus World has also partnered with outside theatrical outfits such as Tugg on the limited June theatrical bow “Extraterrestrial.”

But given exhib resistance, even Roadside’s Cohen, whose distrib has two of the highest-grossing hybrid release hits, says compressed windows “aren’t the panacea for independent film. It’s not going to be the wholesale wave of the future. It’s going to continue to be a narrow alternative.”